Important Information From Your Ocean Resort Villas Board of Directors

Thoughts from Owners Please......

June 24, 2016

Dear Ocean Resort Villas North Owner:

Your Board of Directors would like to update you on a very important matter that our Association is facing. Two weeks ago, the Association received an increased assessment for real property taxes for the years 2006, 2007 and 2008. These taxes had previously been paid by the Association in the respective tax year. In an unprecedented maneuver we believe to be retaliatory to our current lawsuit, the County of Maui reopened the tax rolls for those years, changed the methodology used to assess the units and sent the Association a new tax bill. When the taxes were originally assessed, the units were valued on a land plus construction cost basis. The County is retroactively assessing the units using a market value methodology, increasing the real property taxes by an additional $6,879,537.

The Board of Directors is fully engaged and resolute in defending the rights of the Association. We will pursue all reasonably available legal and administrative remedies. Accordingly, we filed tax appeals with the County of Maui last week and will be filing in Hawaiian Circuit Court in the near future.

Despite our formal notices of appeal, the tax bill is due in full today. If the Association fails to pay the tax, it will be subject to a 10 percent penalty and interest at a rate of one percent per month until paid in full. The Association’s legal counsel has asked the County of Maui for an extension and postponement of the due date of the tax payment, as this liability places an onerous burden on the Association and its Owners. The County of Maui has denied the request, and the Association will pay the taxes under protest to avoid the substantial penalty. The payment of the contested tax assessment will remain in an escrow account which neither the Association nor the County of Maui may access until the appeal is resolved.

There are very few alternatives available to the Association to fund the huge budgetary deficit created by this current tax assessment. The Association is unable to use funds set aside in its replacement reserve account as reserve funds are restricted by law and are to be used only for items within our capital reserve plan. The Association is unable to borrow the funds as its ability to borrow is limited and its line of credit is much less than the tax bill. Unfortunately, the only viable option to pay the tax bill and fund the corresponding large budgetary deficit is to levy an emergency special assessment on all Owners.

The Board has approved an emergency special assessment in the per unit week amount of $389.25 for a One Bedroom, $461.35 for a Two Bedroom Lockoff and $635.71 for a Two Bedroom Lockoff Deluxe. Owners of Biennial or Every-Other-Year interests will be assessed one-half of the amount. Bills for the special assessment will be mailed shortly and will be due thirty (30) days from the date of mailing. Real property taxes are a common expense of the Association and are allocated according to the Declaration. Even though these tax bills are for previous years, it is a new liability that all current Owners share as a common expense regardless of when you purchased your vacation ownership interest. All Owners of record as of June 17, 2016 are responsible for the special assessment.

The Board of Directors is developing supplemental strategies and will update you and provide additional guidance as these events continue to unfold. We appreciate your understanding and support as we continue our legal battle against the County of Maui for fair and equitable tax treatment on behalf of all Owners.

Sincerely,

Ocean Resort Villas Vacation Owners Association Board of Directors